Keller Group shares surge as FTSE 250 group predicts ‘record year’

Keller Group shares topped the FTSE 250 on Monday after the firm said it was on course for a ‘record year’.

The world’s largest geotechnical specialist contractor saw its share price climb 14.4 per cent to £7.70 by lunchtime after it told investors that annual underlying profits were set to be ‘materially ahead’ of market expectations.

Keller said strong demand in the first half had maintained momentum, with solid performances across North America and the Asia-Pacific, Middle East and Africa region.

Its operating margins in the former territory saw a ‘more progressive’ recovery than anticipated, supported by robust pricing levels in the Suncoast subsidiary and ‘sustained operational improvements’ in its foundations segment.

Trading in the latter region was boosted by its Australian business, Austral, returning to profit in the third quarter amid healthy orders from the infrastructure sector.

In comparison, Keller’s European division was badly impacted by a slowdown across the residential and commercial industries, which have been hit by elevated inflation and interest rates.

But profitability was affected by a ‘competitive pricing’ environment, difficulties at some projects and the non-repeat of several large-scale projects from the previous year, Keller said.

Nonetheless, Keller’s chief executive, Michael Speakman, said the overall performance ‘reflects continued momentum and operational improvements within the business and the outstanding contribution of colleagues across the group’.

Brokers Liberum and Investec have upgraded their price targets for Keller following the latest trading update to 1,400p and 1,250p, respectively.

Based in London, Keller’s origins date back to Renchen, Germany, in 1860, when Johann Keller set up a pump and well construction firm.

Among the major projects it has worked on include London’s Elizabeth Line, the Thames Tideway Tunnel and the extension of the ExCel exhibition centre. 

Outside the UK capital, it is helping to build the world’s biggest polyhalite mine in North Yorkshire, the new stadium for American football franchise Dallas Cowboys, and Zayed City, an urban development scheme in Abu Dhabi.

Keller reported turnover climbed by almost a third to £2.9billion last year while underlying operating profits rose by 23 per cent to £108.6million despite controversy at its Austral operation.

An internal review found that two senior staff members had committed financial reporting fraud by overstating the division’s performance since 2019.

The saga caused an estimated £7.3million hit to the company’s operating profits for the first half of 2022, as well as a cumulative £11million impact over the four prior years.